Study on financial inclusion and viability of business correspondent model

Abstract

The Indian economy, despite the high growth momentum in the first decade of this century, could not bring down poverty and unemployment. A vast majority of the population remains outside the ambit of basic health and education facilities even today. The rich poor divide has widened even further in the recent past. Social and economic inequalities have increased alongside high growth rates which have only exacerbated regional inequalities. Over 25% of Indians continue to live in abject poverty. As a result, Inclusive growth has become a national policy objective of the Union Government. Research shows that countries with large proportion of population excluded from the formal financial system also show higher poverty ratios and higher inequality. If we are talking of financial stability, economic stability and inclusive growth with stability, it is not possible without achieving financial inclusion. Thus financial inclusion is no longer a policy choice but is a policy compulsion today. It is estimated that about 40% of Indians lack access even to the simplest kind of formal financial services. About 500,000 villages are yet to be provided with banking services. Starting with the nationalization of banks, priority sector lending requirements for banks, lead bank scheme, establishment of regional rural banks (RRBs), service area approach, selfhelp group-bank linkage programme, etc., multiple steps have been taken by the Reserve Bank of India (RBI) over the years to increase access to the poorer segments of society. It encouraged expansion of bank branches, especially in rural areas, resulting in multifold increase in branch network